Abstract
We investigate how different types of environmental policies and new regional environmental knowledge affect new venture creation in and financing of green (low carbon), brown (fossil fuel) and gray (unrelated to natural resources) technologies across 24 OECD countries and 293 regions over the period 2001-13. We find that new regional environmental knowledge positively impacts new venture creation in green technologies, and moderately in gray industries. Gray industries also benefit from enhanced start-up financing in regions where new environmental knowledge is created, confirming that environmental knowledge creation yields positive externalities beyond the green sector. We also find that a more stringent environmental policy regime negatively impacts the creation of new ventures across sectors, but most prominently, it discourages new fossil fuel ventures. However, once entrepreneurs decide to start a new business, stringent environmental policies have on aggregate a positive effect on new venture financing across sectors, particularly through feed-in-tariffs and emission standards.
Highlights
The increased societal attention and urgency towards combating climate change and transitioning to a low carbon, resource efficient economy has prompted many actors around the globe to seek solutions to solving environmental issues
We investigate how different types of environmental policies and new regional environmental knowledge affect new venture creation in and financing of green, brown and gray technologies across 24 OECD countries and 293 regions over the period 2001-13
We have reviewed the green sub-sector classifications used in literature (BNEF, 2019; Criscuolo and Menon, 2015; Gaddy et al, 2017; Vedula et al, 2018) as well as those from specialised research providers such as the Cleantech Group5, and we narrow the definition of green start-ups as those operating in any of the following 8 green technology subsegments: battery storage and fuel cells, biofuels, environmental data, energy efficiency, electric vehicles and low carbon mobility solutions, low carbon grid infrastructure, renewable energy generation and low carbon materials R&D)
Summary
The increased societal attention and urgency towards combating climate change and transitioning to a low carbon, resource efficient economy has prompted many actors around the globe to seek solutions to solving environmental issues. Technology and innovation studies, through the lens of the knowledge spillover theory of entrepreneurship (KSTE), have argued that new environmental knowledge created but uncommercialized in incumbent companies or research organisations is the main source of entrepreneurial opportunity in the low carbon energy transition These are mainly empirical studies at the regional level within a single country, predominantly across the US (Malen and Marcus, 2017; Vedula et al, 2018) and Italy (Colombelli and Quatraro, 2017). Our study shows that environmental policy plays an increasingly important role for the financing of green start-ups but less so in the decision-making of entrepreneurs to enter the sector in the first place We explain these findings through the lens of institutional theory and KSTE, and provide avenues for further theoretical developments by examining the exceptions that emerge in our study, which do not necessarily conform with existing theory.
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